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Macro blips cannot be wished away

business Updated: Dec 03, 2007 23:17 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
Highlight Story

The Indian rupee (INR) has seen the highest appreciation among Asian currencies this year. Is this merely a reflection of global fund flows or a significant shift in the country’s global competitiveness?

Rahul Bajaj, Rajya Sabha MP and Chairman, Bajaj Auto feels that the “real economy” – including manufacturing, services and agriculture—is seriously suffering because of the rupee that has appreciated by more than 15 per cent in the last 12 months.

“Indian industry must become ever more competitive. At the same time, it is important to ensure a level playing field for the Indian industry to ensure fair global competition. Industry must keep persuading the government to create a more enabling environment, particularly in terms of building infrastructure and tackling corruption,” Bajaj, known for his strong views in defence of Indian industry, said at the India Economic Summit.

Gerard Lyons, Chief Economist and Group Head, Global Research, Standard Chartered, United Kingdom said the rupee’s rise needs to be seen in the context of India’s long-term growth potential.

“Inflation is a brewing problem driven by liquidity and fuel prices. The central bank (RBI) will have to do more to suppress this in the coming years,” Lyon said.

“Instead of talking about it, politicians need to act on it,” he added.

B Ramalinga Raju, Founder and Chairman, Satyam Computer Services said India needs a scenario in which the rupee does not strengthen significantly.

“Much of the rupee’s rise is because of capital inflows. Foreign companies, faced with rising costs, are questioning whether to continue engaging with India. India today is losing many opportunities it’s not fully realising,” Raju said.

Suman Bery, Director-General, National Council of Applied Economic Research said the anchor currency of the world, the dollar, is falling because of the mismanagement of the US economy.

Bery too felt that the rupee should be viewed against a basket of currencies, but argued that it is not time to worry yet.

“What really matters are inflation, investment and overall growth,” he said.

He suggested that China is not a model to follow—they are suffering by “exporting huge numbers of goods and getting worthless dollars in return”. While further constraints on external commercial borrowing are one remedy, Bery argued that “Indian business needs capital – this is India’s moment”.